Interest rates raised to 0.75% by Bank of England - business live

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The UK hopes to deter further Russian aggression and activity in eastern Europe by developing new defence plans with Romania, Gavin Williamson, the defence secretary, has said. As the Press Association reports, on a visit to Romania Williamson said RAF Typhoons recently intercepted a Russian bomber looking to infringe Nato airspace as part of the alliance’s mission to police the skies over the Black Sea. He added that the British Army will support a Romanian training exercise later this year - known as Exercise Scorpions Fury - while a memorandum of understanding on future defence co-operation will also be developed. He said:

Today I announce the British Army will be supporting the Romanian-led multilateral brigade during Exercise Scorpions Fury later this year. I can also announce we’ll be developing a memorandum of understanding on future defence co-operation that will see us agree an action plan outlining joint activity in the coming years. This will also act as a further deterrence to those who wish to do our nations harm.

That’s all from me for today - and probably until September. We won’t be running a regular Politics Live blog until Monday 3 September, although we are planning to run a readers’ edition one every Friday.

Have a great August, and I hope everyone gets a decent holiday.

Gavin Williamson, the defence secretary (2nd from left) and the Romanian defence minister Mihai Fifor inspect a guard of honor upon Williamson’s arrival at the Ministry of Defence, in Bucharest, Romania. Photograph: Bogdan Cristel/EPA

ITV’s Robert Peston has written an interesting post on his Facebook page about Brexit. Picking up on the FT story (see 11.44am), he says Michael Gove, the environment secretary, is now backing a “blind Brexit”. Here’s an extract.

My understanding is that one of the Brexit campaign’s two big beasts, the environment secretary Michael Gove, has arrived at the perhaps startling view that the least worst option now is what some are styling “a blind Brexit”.

This would be to recognise that parliament is too divided and too much time has already been wasted for a detailed plan for our future relationship with the EU to be negotiated and agreed in time for the summits in October or December.

Instead the withdrawal agreement - which formalises a default plan to keep open the Northern Ireland border and around £40bn of divorce payments by the UK - would be ratified by EU leaders, together with the highest level guiding principles for the UK’s future relationship with the EU.

In other words, we would leave the EU not having a clue whether Brexit would ultimately involve membership of the single market like Norway, or the customs union like Turkey, or associate status like Ukraine or having a Canadian style free trade agreement.

Sarah Wollaston has become only the second Conservative MP to officially back the People’s Vote campaign for a second referendum on Brexit, Business Insider reports. Anna Soubry was the campaign’s first official Tory supporter, although some other Conservatives have either explicitly or implicitly backed a second referendum.

Dominic Raab, the Brexit secretary, has been meeting the French Europe minister, Nathalie Loiseau. (Loiseau gave a big interview to the Today programme on Brexit last week. I wrote it up here and here.)

At a recent dinner, Mr Gove talked with moderate Conservative MPs and peers about a scenario in which the UK would remain “parked” in the European Economic Area, like Norway, to avoid the chaos of a disorderly “no deal” exit.

The idea of the UK’s staying in the EEA in the event of Brexit talks collapsing has been gaining ground among some Conservatives, even though such an outcome would outrage hardline Eurosceptics and could trigger the downfall of Mrs May.

The prime minister has ruled out EEA membership, arguing that a Norway-style relationship with the EU would cross her red lines relating to free movement, EU budget contributions and the European Court of Justice. EEA membership requires full free movement of goods, services, capital and people across borders.

But Mr Gove raised the possibility at a private dinner with about 20 Tory MPs and peers on June 25, as he ran through various options in the event of Mrs May being unable to agree a deal in Brussels before March next year.

It is true that Mr Barnier has taken an ultra hardline about the UK remaining in the ‘single market for goods’ - but that is partly because that is all that his negotiating mandate allows.

Mr Barnier has argued that the UK plan to be free to diverge on services allows the UK marginal competitive advantage on goods, since commission economists warn that the value of modern industrial goods is 20-40 per cent comprised of services.

But EU governments are much less uniformly agreed on the merits of these arguments, as are even some pro-EU economists.

One senior EU Brexit diplomat from a northern trading state said his government was “yet to be convinced” by the commission arguments against agreeing a single market in goods, when set against the potential costs of a chaotic ‘no deal’.

Similarly on the question of the customs union backstop. “We should have bitten their hand off when the Brits offered it,” he said. “And there is a deal if is still be done, if the Brits make the right offer on alignment and the customs union.”

This is why Mrs May and her ministers are engaged in a diplomatic full court press in Europe to sell elements of Chequers which, when stripped of the wilder elements of cakeism, could yet elicit concessions on the EU side that could help it ‘sell’ at home.

Ms Merkel wanted the costs of Britain’s “independence” from the bloc to be crystal clear. EU voters could not see Britain leave with the promise of membership-light, enjoying benefits without the hassle.

This is where her approach may be restyled. Senior EU diplomats think Berlin may be more open to closer security co-operation and a more aspirational statement on future economic relations that avoids some hard truths.

The aim would be to help Mrs May win approval for the all-important withdrawal treaty in Westminster. Given that the accompanying statement on future EU-UK ties is non-binding, what is there to lose?

Several Momentum members on Labour’s NEC have tried to bring about a change of approach on the International Holocaust Remembrance Association (IHRA) definition of anti-Semitism, but have been overruled by senior staffers to Corbyn. (Corbyn’s office is, in of itself, split over how to handle the row.)

Jon Lansman, Momentum’s founder and director, spoke out in the WhatsApp group in which Momentum members on the NEC liase with the leader’s office, describing it as a “massive tactical mistake” to take disciplinary action against Margaret Hodge, a senior Jewish Labour MP, for attacking Corbyn on the issue of anti-Semitism, while failing to bring disciplinary measures against Willsman for his remarks on the issue at an NEC meeting. But Karie Murphy, Corbyn’s influential chief of staff, overruled Lansman, saying that Willsman’s apology on the issue meant the matter was closed.

One well-placed source described the row as a “shitshow”. The issue at stake is that Corbyn himself regards the row as a foreign policy issue, confined to the question of how Labour members can talk about Israel, while his critics primarily see it as a domestic issue, confined to the need to reassure British Jews of Labour’s intentions and to take the sting out of the row, which risks derailing a summer of detailed policy interventions from the opposition. Murphy sees the argument as about the right of the Labour leader and the general secretary, Jennie Formby, to make decisions on these matters, and has also criticised John McDonnell, one of Corbyn’s most steadfast allies, for setting out a different approach in public. Both Lansman and Rhea Wolfson, who is standing down from the NEC to run for the seat of Livingston, have been overruled by Murphy on the issue.

The Bank of England is widely expected to announce a rise in interest rates at noon. In a pre-emptive statement, John McDonnell, the shadow chancellor, says this would push more families into higher debt. He says:

With wages still below 2010 levels and the gap between people’s income and outgoings at record levels, the concern must be that a pattern of interest rate rises will push more families into higher levels of debt.

The government needs to end its counterproductive austerity programme and raise people’s incomes.

The Welsh assembly is getting a new member today. Helen Mary Jones, a former AM (assembly member), is coming back as a Plaid Cymru member, replacing Simon Thomas, who resigned over allegations being investigated by the police. Jones takes over without an election because she was next on Plaid’s regional list for mid and west Wales.

One of the more interesting contests at the next general election will be Uxbridge and South Ruislip in west London, where Boris Johnson (a new favourite for next Tory leader) is MP. It used to be a safe Conservative seat, but in 2017 Johnson’s majority was halved, to about 5,000. The local Labour party has just opened the application process for people who want to be the Labour candidate. Christian Wolmar, the journalist and rail author who tried unsuccessfully to get selected as Labour’s candidate for London mayor in 2016, says he is applying.

Wolmar's London (@wolmarforlondon)

Excited to be applying for the candidacy for @UxbridgeLabour and hoping to get the opportunity to put an end to Boris Johnson's political career after his eight years of misrule at County Hall and his farcical time as Foreign Sec

We are interested in hearing what readers think about how the Labour party is doing. There is a call-out here, including a form where we would like you to submit comments.

What do Labour party supporters think of the party's performance?

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Don’t respond below the line (BTL) here. Well, you can if you want, but we would like to collate the responses, and the ones that will be most closely read, and the ones that we may repost, will come from the call-out.

Ricketts said Macron “doesn’t believe in softening” the position on Brexit as “he is a passionate pro-European”. Ricketts went on:

Secondly, [Macron] is the last person to want to break ranks with what has been quite an impressively disciplined EU side.

I’m all for Theresa May going and talking to Macron, there’s lots to talk about - security and all sorts of other things - but I think we have got to accept we have got to do the hard yards of negotiating in Brussels, we are not going to find the French or any other major country wanting to break ranks.

Austerity and cuts like bedroom tax directly led to Brexit, academic research suggests

As chancellor, George Osborne was one of those in government who was most opposed to Brexit and who campaigned most aggressively for a remain vote in the EU referendum in 2016. But he was also the prime architect of the coalition government’s austerity programme and new research from the University of Warwick suggests that Osborne’s austerity policies directly led to Britain voting to leave the EU.

The report has been written by Thiemo Fetzer, associate professor in economics at the university. The full 100-page document is here (pdf).

The fiscal contraction brought about by the Conservative-led coalition government starting 2010 was sizable: aggregate real government spending on welfare and social protection decreased by around 16% per capita. At the district-level, which administer most welfare programs, spending per person fell by 23.4% in real terms between 2010 and 2015, varying dramatically across districts, ranging from 46.3% to 6.2% with the sharpest cuts in the poorest areas. Using data from government estimates on the simulated intensity of specific welfare cuts across districts, I show that support for Ukip started to grow in areas with significant exposure to specific benefit cuts, after these became effective ...

The austerity-induced increase in support for Ukip is sizable and suggests that the tight 2016 EU referendum result (leave won by a margin of 3.5 percentage points) could have well resulted in a victory for remain, had it not been for austerity. The point estimates suggest that in districts that received the average austerity shock, Ukip vote shares were, on average, 3.58 percentage points higher in the 2014 European elections or even 11.62 percentage points higher in the most recent local elections prior to the referendum. Due to the tight link between Ukip vote shares and an area’s support for leave, simple back of the envelope calculations suggest that leave support in 2016 could have been up to 9.51 percentage points lower and thus, could have swung the referendum in favour of remain.

And this is from the conclusion.

This paper presents novel and comprehensive evidence suggesting that austerity induced welfare reforms brought about by the Conservative-led coalition government from late 2010 onwards are key to understanding Brexit. Austerity-induced welfare reforms are a strong driving factor behind the growing support for the populist Ukip party in the wake of the EU referendum, contributed to the development of broader anti-establishment preferences and are strongly associated with popular support for Leave. The results suggest that the EU referendum either may not have taken place, or, as a back of the envelope calculations suggests, could have resulted in a victory for remain, had it not been for austerity.

Researchers have made a similar argument before (including in this paper, co-authored by Fetzer.) But the new study is much more comprehensive, because it includes evidence from a huge Understanding Society household panel linking exposure to benefits cuts with rising support for Ukip. As Fetzer explains in a blog summarising his paper, the bedroom tax was one factor.

Individuals who were exposed to a set of welfare reforms shift to Ukip once they had experienced the benefit cut. One example of a reform studied is the so-called “bedroom tax”. The results suggest that households exposed to this tax shifted towards supporting Ukip, and experienced economic grievances as they fell behind with their rent payments due to the cut. Indeed, dissatisfaction with political institutions as a whole increased following such cuts, with affected individuals being more likely to think that their vote is “unlikely to make a difference” and that “public officials do not care” about them. In other words, by curtailing the welfare state, austerity has likely activated a broad range of existing economic grievances that have developed over a long period.

These charts, from the paper, show the correlation between exposure to benefit cuts and rising support for Ukip.

Correlation between exposure to benefit cuts and rising support for Ukip Photograph: University of Warwick

All of which is worth flagging up today because, frankly, there is not a lot else on at Westminster. Dominic Raab, the Brexit secretary, is on a visit to Paris, and Gavin Williamson, the defence secretary, is on a trip to Romania.

The main event with political implications today will be the Bank of England decision on interest rates at noon, but Graeme Wearden will be covering that on his business live blog.

Interest rates: Pound falls ahead of Bank of England decision - business live

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As usual, I will also be covering breaking political news as it happens, as well as bringing you the best reaction, comment and analysis from the web. But I’m afraid I will be wrapping up today at lunchtime.

I try to monitor the comments BTL but normally I find it impossible to read them all. If you have a direct question, do include “Andrew” in it somewhere and I’m more likely to find it. I do try to answer direct questions, although sometimes I miss them or don’t have time.

If you want to attract my attention quickly, it is probably better to use Twitter.